Landlord Must Refund U&O Tenant Paid While Eviction Case Was Pending

Landlord sued to evict tenant from two apartments landlord claimed were unregulated. During the course of the eviction proceedings, tenant paid rent or use and occupancy (u&o) either into court or directly to landlord. At some point, landlord and tenant stipulated to delay the eviction proceedings while tenant appealed a DHCR ruling that the apartments weren't subject to rent stabilization. At the end of the eviction case proceedings, tenant asked the court to direct a refund to her of all u&o paid while the eviction case was pending. The court ruled for tenant.

Landlord appealed and lost. The appeals court found that landlord was precluded from recovering rent or u&o because the lower court found that the two apartments were previously illegally altered by landlord and occupied without a valid certificate of occupancy. Landlord didn't appeal this finding. And, although the parties agreed that tenant must pay u&o while she appealed the DHCR's decision, the parties specifically stipulated that the u&o payments were subject to tenant's claim that the payments ultimately were uncollectible under Multiple Dwelling Law Section 302. So, the u&o either deposited into court or paid directly to landlord must be returned to tenant. 

Trafalgar Co. v. Malone: 2021 NY Slip Op 51116(U), NYLJ No. 1638889234 (App. T. 1 Dept.; 11/26/21; Edmead, PJ, Hagler, Silvera, JJ)